been fully realized. Based on recent experience, health plans have typically contracted with all available physicians and hospitals rather than developing tighter networks, and the quality of care for individuals with chronic disease in FFS and managed care has ended up being roughly equivalent (Norwalk, 2007). However, a review of studies conducted by Miller and Luft found that enrollees in Medicare HMOs reported worse results on measures of access to care and patient satisfaction (Miller and Luft, 2002). In short, considerable debate still exists about whether the added funds provided to MA plans have been worth the investment.

New Financing Mechanisms

Given the challenges associated with traditional FFS Medicare and MA, a new model of payment is needed to support effective models of care and the integration across various settings of service that are necessary to prevent or delay declines in functional and health status for older adults (Biles et al., 2006; Guterman and Serber, 2007). Even with start-up funding from a foundation, insurer, or provider organization, the long-term sustainability of such services is limited in the absence of appropriate reimbursement from Medicare and other payers.

It is beyond the scope of this report to recommend a specific method of reimbursement to support new models of care, but the committee did identify several promising methods. In general, it is important to note that during the research and demonstration phase of a new model CMS typically sets up financial arrangements that differ significantly from the traditional FFS arrangement. In order to move from the demonstration stage to widespread adoption, the general financing system will also need to be altered, likely requiring that some sort of capitated arrangement be put in place.

Special Needs Plans

As a result of the Medicare Modernization Act (MMA) of 2003,4 special needs plans (SNPs) were created within the MA program. SNPs can target their enrollment to high-needs patients such as institutionalized beneficiaries, dually eligible beneficiaries, or beneficiaries with severe or disabling conditions (CMS, 2007c). Targeted enrollment allows plans to design clinical programs that can accommodate those with distinct health needs, which can potentially result in reduced hospitalization and institutionalization (CMS, 2007a). SNPs are paid under the same system (risk-adjusted capitation) and regulated in the same manner as other MA plans.

The number of SNPs has been growing rapidly, increasing from 276


Medicare Modernization Act of 2003. Public Law 108-173. 108th Congress. (2003).

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